Ding ding ding! See 1 Bloor East; it's had a completely vacant storefront at the very east end since completion 6 years ago, "prime location" be damned.
My preferred solution is also significant tax changes.
In order for locations to sit empty for even 1 or 2 years, there must a problem with the market and/or financial incentives that allow for the behaviour.
On the market side, it appears that power is concentrated in the hands of institutional landowners and large commercial operators. This is difficult to address, but it could be helped in the long-run by prescribing a better mix of retail unit sizes, or prohibiting builders from retaining retail units after construction. A more daring solution would be to target the overall market structure by limiting the size of REITs, among many examples. Politically, this is not going to happen.
On the incentives side, there are two main forces: real estate appreciation and taxation. We can't really do anything about the first -- where land is going up in price, there is a return to be had simply by holding real estate. On the taxation side, MPAC valuations of commercial properties, for some inexplicable reason, take into account average vacancy rates when assessing value. Commercial taxes are also comically low at about 2% of assessed value in Toronto.
On the positive side, as of 2018, provincial laws were amended to allow municipalities to eliminate their vacant property rebates, which were allowing property owners to further reduce their payable taxes regardless of why or for how long their property had sat vacant. Toronto immediately eliminated its program in 2018.
Now, I see two further steps:
1. Reform how MPAC values commercial properties by mandating the assumption that properties are fully used or occupied; and
2. Institute a vacant property tax that penalizes the owners of properties that have been vacant for an unreasonable period time in an amount at
least equal to their market value appreciation.
Now, you might be ready to fight. Shouldn't property owners be able to do whatever they want with their property, including holding it solely as an asset? Wouldn't this be unfairly penalizing property owners who genuinely can't lease their properties?
The answer is no, to both. First, property owners are not prevented from buying, holding, or selling property -- they must simply put it to a productive use if they wish to avoid the tax consequences of their behaviour. It is a balancing of the economic and social cost to society of a vacant property (of which there are many) against this non-productive, private choice. Second, there is nothing to say that the tax cannot or should not be adjusted based on local market conditions, or changes in the market over time. Third, if somebody genuinely cannot put a property to a productive use, maybe it SHOULD be sold to a more innovative party.
TL;DR - We need reforms to provincial and municipal laws to institute a vacant commercial property tax.
